May 8, 2019
Mark Newton CMT, Newton Advisors, LLC
SPX Cash Index
Support: 2860-2, 2836-40, 2775-80
Resistance: 2898-2900, 2910-2, 2936, 2944-5
Will be on CNBC Trading Nation today 2:25pm EST along with CNBC Fast Money today at 5:20-5pm
Tuesday Technical Video, 5/7/19, discussing Selloff yesterday
Thursday Technical Webinar link- 20-min overview of risk assets
SPX - (3-5 Days)- Bearish on break of 2901 Trend gave way again and prices closed back under 2901, closing down at new 4 week lows. Technology broke down from its four-month uptrend, and is reason to think this decline extends in the short run. However, downside should be limited to 2775-2800 before stabilizing and bouncing
EuroSTOXX 50- Bearish given yesterday's close under 3425. While prices are hugging the lower Bollinger on Daily charts, any bounce likely should not get over 3475 before turning down to challenge March lows near 3281-3 which also hits the 38.2% FIbonacci retracement.
HSCEI- Mildly Bullish- Expect selloff has reached good support to put in a trading low within 2-3 days. HSCEI managed to hold March/April lows and its right to use recent weakness to consider covering shorts. Above 11429 creates a more bullish short-term view.
Trading Longs: FIS, CHD, SBAC, DRE, NEE, TMUS, SANM, MHK, BAC, C, V, IYT, KEX, ZTS, MYL, CAR, WIX, TSCO, MAS, TRP, FLT
Trading Shorts: BHGE, DVN, EOG, XEC, NOV, SLB, FOSL, WATT, AOS, MAT, SIG, CTXS, OSTK
Equity markets look to have finally broken down after a valid rebound attempt on Monday into the close. Prices violated meaningful intermediate-term uptrends yesterday in multiple indices domestically and abroad (SPX, DJIA, NDX, COMPQ, SX5E, SXXP, VALUA, NYA) which had been in place since late December. Volume expanded significantly on the break, with both Monday and Tuesday's totals for SPY reaching the highest levels in nearly two months. Breadth finished at a bit over 4/1 negative for NYSE, while volume surged into Declining vs Advancing issues. 9 of 11 sectors fell more than 1% while Industrials and Technology showed losses of more than 2% into the close. While oversold on hourly charts, which could allow for mild bounce, momentum looks to be clearly starting to turn lower in the very short run. This should turn out to be a near-term decline only and be one to buy into, given intermediate-term momentum, Advance/Decline near all-time highs, and attractive patterns in Financials, healthcare, Transportation stocks. Yet, in the short run, additional weakness looks possible into next week, with 5/16-7 being a key time for trend change.
Our recent top happened on 5/1, which happened to occur at a 45 degree time interval from our 3/21 minor high, 180 degrees from last November 7, 225 from our 9/21/2018 former all-time high, and 240 from 9/7. As many know, utilizing angles of the circle, when projected forward, based on the work of WD Gann, can often pinpoint areas for trend change. May 5, specifically lies halfway between the Spring and Fall Equinox and is always an area to watch carefully for reversals.
Overall, near-term weakness should have some support at 2840-3, right near the 50% retrace of the move up from March , but larger areas lie near 2787-2800 into mid-May. Outside of Equities, Treasuries have extended gains and yields down to 2.447 and a retest of 2.33 looking increasingly likely while German Bund yields look to test former lows from early April near -.10%. The yield curve has begun to flatten again, turning back down to 16.7 on 2/10s while the US Dollar has made fractional gains. Meanwhile, most Metals are down with the exception of Gold which looks to largely be a safety trade, along with gains in Japanese Yen, which has moved to 110.23 v USD. Crude oil fell down under 61.50 and while a low here seems close technically, one can't rule out a bit more weakness to undercut $60 which would bring about trend exhaustion into end of week (Supporting a bounce) Finally, it's worth pointing out that offshore Yuan is weakening again back to the prior days' lows, with USDCNH now at 6.80
While a Chinese deal might be right around the corner, uncertainty has begun to rise and Equity markets have begun to show more weakness, finally, some might say, after nearly a month of breadth deterioration. Going forward, it will pay to keep an eye on signs of HIGH TRIN readings (excessive volume in Down stocks vs UP) ,VIX inversion, and some evidence of other Fear.. Equity Put/call spiking or signs of exhaustion in VIX on absolute basis.
Long XLU with target at 61.50 and stops at 57.50 on a close
Long XLP with target at 58.90 and stops at 56.50
Long XLF with targets at 28-28.50- Stops on daily closes under 26.90
Long IWM with targets at 162.50
Additional charts and thoughts below.
S&P- Bearish- Yesterday's decline extended under prior day's lows, turning trends bearish as prices fell to new multi-week lows, breaking a 2-month uptrend in the process. While near-term overdone on hourly charts, daily momentum is not oversold (RSI=42) and could extend further in the days/week ahead before any bottom. Overall, getting down to 2840 looks like the first meaningful area on this pullback. Below that would likely bring about a test of 2775-2800, an area that coincides with the 50% retracement of the move from mid-February.
Technology fell to new multi-week lows yesterday and while still the top performing sector in YTD rankings, up 23.42%, the best performing sector by nearly 400 bps over the 2nd best, Consumer Discretionary, it's one of the worst over the last week, dropping 2.79%. This trendline break in Equal-weighted Technology looks important, and a meaningful trend violation after four months of gains. Additional relative weakness looks likely here in the short run, which at 20% of SPX, could put pressure on benchmark indices.
Treasury Yields (US 10YR Treasury Yield- TNX) Treasury yields have continued lower, with yields dropping below last week's highs, opening up the door for a rests of 2.33 near March lows. Yields peaked out about a week ahead of stocks, and now both have been trending lower the last few days. Most European yields are far weaker than US, so the drop in US yields and the 2/10 curve makes sense in recent days. OVerall, until yields can climb back above 2.60, it's right to be long Treasuries and/or ETFs like TLT, using minor dips to buy more.